Will Big Cola entry shake Coke, Pepsi dominance?
Nigeria’s CSD market is becoming interesting with Big Cola from Peru entering the market dominated by Coke and Pepsi. LaCasera about 14 years ago perforated the wall with PET bottle niche. Big Cola is coming with ‘more value less money’. Daniel Obi in this report assesses any possible threat to the dominants.
Nigeria’s big market
International brands especially in the Carbonated Soft Drink (CSD) segment have in the recent time found Nigeria as an investment delight. This is due to the country’s huge market size with estimated population of over 170 million (comprising about 90 million youth population), growing middle class and improving purchasing power.
Nigeria’s economy with such intimidating market statistics and abundance of human and material resources yet to be tapped is hard to ignore by international investors.
Market-intelligence firm, Euromonitor International was reported in Marketrealist Website as saying that consumer-expenditure growth in emerging markets has surpassed that in developed markets every year since 2000, and it is expected to continue doing so.
In spite of infrastructure challenges, Nigeria retains the top position as market favourable to international investors because of high yield, cheap labour and consumer demand.
Entry of Big Cola from Peru
The dominance of Coca Cola with global brand value of about $79.4 billion, Pepsi about $19.6 billion and others such as LaCasera did not dissuade Big Cola from the stable of AJE Group, a privately owned multinational beverage company with headquarters in Peru and Spain from making entry in to Nigeria.
Recently, the company launched its soft drink product in three variants, BIG Cola, BIG Orange and BIG Lemon. The Country Manager, Theo Williams said “We are here to democratize soft drinks consumption. We dream big, we think big. In line with our global brand values of Brave, Entrepreneur, Ingenious and Surprising, we came to Nigeria with the determination to brace all odds to provide consumers of soft drinks with great choice of quality beverage at affordable prices”.
The product is entering Nigeria on reduced price and higher quantity compared to market convention. It is selling 65 cl in pet bottle for N90 compared to competition which is selling 50 cl for N100. “Our global operational philosophy is that we offer consumers ‘More value for less money’. This implies we democratize the consumption of soft drinks wherever we operate, ensuring anyone and everyone can afford a drink, every day, anytime and anywhere”, Williams emphasised.
The company said it is the 3rd largest producer of carbonated soft drinks in the world, and the 10th largest producer of soft drink by volume, worldwide.
The competition
Nigeria is a big market and it is big enough to accommodate every player at different levels, volume and sales as beverage drinks will continue to remain largest selling consumable in spite of healthy eating caution. To some, it is a habit drinking the beverages while to others, the refreshing satisfaction derived from the drinks, especially when cold creates the attraction to it while children find it pleasing drinking the beverages regularly. There are several products in the CSD segment but the market is presently dominated by Coke, Pepsi and recently LaCasera. All the brands offer different variants to meet consumers demand and taste. Big Cola does not only want some slice of the market share but to push ahead.
Any immediate threat?
While Big Cola with initial investment capital of N5 billion is coming with its More Value for less money niche to cut some share of the market for itself, brands like Coke and Pepsi have their dominant strategy and to beat it, perhaps requires very huge investment.
For instance, Coke which has become a quality for benchmark has a long history in Nigeria having established its presence in the country about 65 years ago and since then the brands of the multinational company with headquarters in Atlanta, USA established in 1886 have remained fresh and sparkling in the minds of consumers, enabling it to maintain an entrenched position as long standing market leader. Not only that, it has top of the mind awareness among consumers and the general public alike.
There are number of secrets to this success according to Nathan Kalumbu, Coca Cola’s president for Eurasia and Africa, whose region contributes about 19 percent to the entire company’s growth. In an interview in Cape Town during the World Economic Forum in Africa earlier in the year, Kalumbu said, “the most important is focusing on consumers and being able to understand what consumers want. For instance, as Africa continues to grow and African middle class grows, it is demanding more option of beverages. Our company has been broadening the portfolio of its products to suit the needs of consumers. When we started in Nigeria we were producing just Coke but today we have more sparkling brands and in to juice and water as well. We are also expanding our packaging options in various sizes and types such as PET, Can and returnable bottles. Another factor is our ability to work with communities and government as partners for development. The other elements are quality and marketing which resonates with consumers”.
Another of Coca Cola strength is big operation and distribution network that has been a strong competitive advantage. Presently, NBC, Coke’s bottler operates 13 bottling plants, 57 distribution depots and a network of over 600,000 distribution and retail partners. Coke also has deep pocket for advertising spend in various platforms. The company has continued to lead in the carbonated drink market with about 50 percent market share, according to Euromonitor.
On the other hand, Pepsi produced by Seven-Up Bottling Company Plc, established in Nigeria in 1960 is one of the largest manufacturing companies in Nigeria. The company has nine bottling plants located strategically across the country. It also has a well coordinated distribution network across Nigeria. Pepsi which owns leading brands also budgets huge amount for advertising purposes.
Also, LaCasera after berthing in Nigeria in 2001 shook the market as the first carbonated drink to bottle in PET. Described as a daring move in all standards, others have since followed the trend. Since then it has introduced other variants to push ahead and has never relented in its commitment to supplying first class soft drinks to Nigerians with good distribution network.
Innovation, distribution, product promotion as market drivers
Considering product quality as guaranteed by the players in the severe competitive market, then product innovation, distribution and advertisement become position-sustaining factors for brands.
In spite of the severe criticism for the perceived effects of sugar content in some soft drinks, analysts still say that CSDs will continue to enjoy considerable demand across ages and therefore availability and advertisement will assist to create the brand top of the mind awareness and purchase.
It is not clear how much CSD operators in Nigeria spend individually or collectively on advertisement but an analyst said it is huge. “Soft drink makers continually invest in branding”. According to Sharon Bailey’s report in the Marketrealist website, Coca-Cola and PepsiCo in 2013, spent $3.3 billion and $3.9 billion, respectively, on advertising and marketing activities.
The dominant brands may not directly respond to the entry of new products like Big Cola but may increase their advertising campaign and product promotion to significantly sustain position. Big Cola managers said they are aware of the importance of the advertisement and are ready for it.
Consumer
As the competition in the CSD market becomes interesting and sizzling, the consumer kingship becomes royalty. The consumer in his/her royalty is always ready to dance where the drum beats loudest. As the Big Cola comes to test the thickness of domination wall by Coke, Pepsi, LaCasera in the market with all their market strategies, it will be a good time to know how much it will perforate the wall.